China’s new energy vehicle (NEV) market is poised for a boom over the next five years. IDC predicts that sales of NEVs in 2020 will reach 1.16 million units, and will continue to grow rapidly in the next two years thanks to government support.
IDC expects the sales of NEVs to reach 5.42 million units by 2025, and battery electric vehicles will account for 90.9% of the NEV sales in 2025, compared to 80.3% in 2020.
Government policies are one of the significant drivers of NEV’s growth in the next five years, according to the IDC. The state has continuously promulgated new policies to support the electrification transformation of the automobile industry in order to promote energy conservation and emission reduction. In April, the state issued a notice extending the fiscal subsidy for NEVs till the end of 2022, helping ease the subsidy decline. The recently issued “NEV Industry Development Plan (2021-2035)” determined the development route of the new energy automobile industry before 2035 and the development goals at different stages.
Automobile manufacturers’ investment will also greatly push the industry’s investment. Companies are expected to accelerate the launch of NEV products and continue to optimize and create more competitive products in the next five years. The strategic layout of top manufacturers and high-end brands in the new energy vehicle market will also prompt other manufacturers to follow suit, creating a linkage effect.
The continuous breakthrough of power batteries will also facilitate the industry’s development and accelerate the popularity of NEVs.
Consumers’ perceptions of new energy vehicles are changing. Subsidies are no longer the only incentives that prompt the purchase of NEVs. Customers are starting to take into account the advantages of new energy vehicles in terms of energy saving, environmental protection and cost of use. With steady and continuous market growth, consumers are expected to be more open to new energy vehicles over the next five years. In particular, young consumers with market education will have a higher acceptance of new energy vehicles in the future, according to the IDC.
Restrictions exist too. Consumers still have reservations about new energy vehicles, such as range anxiety during long-distance driving, battery degradation and safety issues. After the subsidies expire, the lack of price advantage and the low residual value of used cars could prevent potential customers from buying. In terms of charging infrastructure, the coverage of public charging stations is far from reaching the level of gas stations.
With new energy vehicle products maturing and the gradual improvement of infrastructure construction, however, the influence of constraints on the new energy vehicle market is expected to be weakened in the next five years, according to the IDC report.